Mortgage Insurance Cost Calculator

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09-02-2021

There are two types of Mortgage Insurance to protect your mortgage. Each one covers a different risk, so it’s important to understand the policies before you consider taking out cover.

What Is Mortgage Life Insurance?

Mortgage Life Insurance provides a lump sum if you pass away before repaying the debt. This pays off your entire mortgage so your loved ones can stay in the family home without worrying about mortgage repayments if you’re sadly no longer around.

You can add Critical Illness Insurance for an additional premium. This means the policy pays out if you develop a critical illness, such as cancer, heart attack or stroke.

What Is Mortgage Payment Protection Insurance (MPPI)?

Mortgage Payment Protection Insurance covers your monthly mortgage repayments for up to 24 months if illness or injury stops you working. You may also be able to add cover for unemployment depending on your policy.

Our Mortgage Insurance cost calculator compares quotes from the UK’s best Mortgage Life Insurance and Mortgage Payment Protection providers so you can find the most affordable cover for your needs.

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Calculating The Cost Of Mortgage Life Insurance

Insurers calculate Mortgage Life Insurance premiums using both personal and policy factors.

Personal Factors

These relate to you and your health and you mostly can’t change them. They include your:

  • Age
    The older we get, the greater the risk of passing away. Insurers therefore charge older adults more.
  • Health / medical history
    Insurers look at your medical history as serious conditions can shorten your life. If you have a pre-existing condition, insurers usually increase your premiums to compensate.
  • Smoker status
    Smokers are more likely to pass away prematurely. Insurers therefore charge them more for Life Insurance.
  • Occupation
    Some roles involve more risk than others. For example, scaffolders face greater risk in their daily lives working at heights than the average office worker. Insurers therefore tend to charge those in riskier jobs more.

Policy Factors

You choose these when you take out cover. They also affect your premiums and include:

  • The payout
    The larger the benefit you need, the higher your premiums.
  • The length of the policy
    The longer you need the policy, the older you’ll be when it ends and the more risk you present to the insurer, meaning higher premiums.
  • Addition of Critical Illness Cover
    Adding Critical Illness Insurance to form combined Life and Critical Illness Cover means the policy pays out if you become critically ill. This increases premiums notably as the risk of this is higher than of you passing away.
  • Whether you need level or decreasing cover
    Depending on your mortgage, you might need level or decreasing cover. Level cover sees the benefit fixed for the life of the policy. It’s therefore often used to cover interest-only mortgages. Decreasing cover sees the benefit fall with time, usually in line with a repayment mortgage. Level cover is pricier as the risk to the insurer remains fixed.
  • Whether you want joint or individual cover
    You can add a partner to your policy to form Joint Mortgage Life Insurance so you receive a payout if either one of you passes away.

Think carefully if you’re looking into Joint Mortgage Life Insurance. These policies only trigger a payout on the first death and then terminate leaving the surviving partner with no life insurance.

Two single policies maybe better than a joint plan

With Life Insurance on a ‘joint life first death’ basis, the most commonly-used insurance, the surviving partner is left without Life Insurance on the first couple’s death. At that point in their life, it may be expensive for them to get re-covered due to their age and any medical conditions they’ve suffered in the interim.

As such, two single Life Insurance policies may be a better option for couples and usually only costs a few pounds more to potentially secure double the payout from the outset.

Example Policy Premiums

We’ve used our Mortgage Life Insurance Calculator to provide some example monthly premiums. To do this, we’ve made a number of assumptions about the individual involved. For example, we’ve assumed they are:

  • In good health
  • An office worker (an accountant)
  • Seeking £250,000 of cover over 20 years
  • Applying as a single individual (i.e. not jointly with a partner).

Age

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Decreasing Mortgage Life Insurance

30 years old

£5.97

£9.92

40 years old

£10.31

£20.42

50 years old

£23.89

£58.64

Level Mortgage Life Insurance

30 years old

£8.11

£12.20

40 years old

£13.87

£29.25

50 years old

£33.87

£83.59

Premiums represent the best rates available across the UK market and are correct as of February 2021

If you are ready to get your own mortgage life insurance quotes with your chosen level of cover you can use our quote tool to compare all the top UK providers 😊

Key Things To Consider With Mortgage Life Insurance Quotes

Some important factors to look at when choosing Mortgage Life Insurance include:

Online Trusts

You don’t typically need to write Mortgage Life Insurance into trust to protect it from inheritance tax as it’s destined for your lender to repay a debt your estate owes them. However, in certain cases it may be beneficial to do so — you can discuss this with your adviser.

If you do need to do this, look for a policy that offers online trusts. This offers the convenience of completing the paperwork online, including using e-signatures, rather than physical copies and wet signatures going back and forth in the post.

Included Terminal Illness Benefit

Most Life Insurance includes Terminal Illness Benefit as standard so the insurer pays out early if you’re diagnosed with less than 12 months to live. This helps with financial security at a difficult time.

Terminal illness should not be confused with critical illness insurance, it is an accelerated death payment and does not pay out should you suffer a serious illness such as heart attack, cancer or stroke.

If you want to protect yourself against the risk of suffering a serious illness you could considering adding critical illness insurance to your life insurance or setting up a separate income protection policy.

Waiver of Premium

Some insurers include this for free, while with others it’s an optional extra for an additional premium.

It means the insurer steps in to pay your premiums if you’re ever off work sick and not earning. This lets you keep up with the policy until you get back on your feet so your Life Insurance doesn’t lapse.

Additional Benefits

One key way insurers distinguish themselves is in the additional benefits they offer (almost always for free) with their policies. Some of the best include:

  • Remote GP appointments via telephone or video call
  • Hospitalisation benefit, if you spend a set number of days as a hospital inpatient
  • Second medical opinion service, offering you an expert second opinion on a recent serious diagnosis or recommended course of treatment.

Calculating The Cost Of Mortgage Payment Protection Insurance

As with life cover, insurers calculate Mortgage Payment Protection Insurance premiums using both personal and policy factors.

Personal Factors

These include your:

  • Age
    The older you are, the greater the risk you present to the insurer as you face greater risk of illness or injury.
  • Health / medical history
    Depending on your circumstances, insurers may increase premiums if you have a pre-existing condition or an adverse medical history. Alternatively, they may simply exclude that condition outright.
  • Smoker status
    Most, although not all, insurers charge smokers more for cover due to their increased risk of illness compared to a non-smoker.
  • Occupation
    Riskier occupations (e.g. manual roles, particularly those using heavy machinery or working at heights etc.) generally mean higher premiums compared to the average desk worker.

Policy Factors

You choose these when you take out cover. They also impact your premiums and include your:

  • Payout
    You align this with your mortgage repayments so the amount the insurer pays out covers these. The higher the payout, the more expensive your premiums.
  • Policy term / cease age
    The longer you need the cover for the older you’ll be when the policy ends. This poses a greater risk to the insurer, so the longer you run the policy for the more expensive it will be.
  • Payout period
    How long you’ll receive a benefit for if you claim. Mortgage Payment Protection Insurance offers short-term cover, paying out for either 12 or 24 months depending on your policy. The longer the payout period, the pricier the premiums.
  • Deferred period
    How long you wait before the insurer starts paying out. The longer you can wait, the lower your premiums.

Example Policy Premiums

We’ve used our Mortgage Payment Protection Insurance calculator to provide some premiums below. To do this, we’ve made a number of assumptions about the individual in question. For example, we’ve assumed they are:

  • In good health
  • An office worker (an accountant)
  • Looking for a 4 week deferral period
  • Seeking a benefit of £1,000 a month to cover their mortgage
  • Want the cover to pay out for up to 24 months if they can’t work
  • Looking for cover up to their expected retirement age of 65.

Age

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🚬

30 years old

£11.30

£15.29

40 years old

£17.26

£22.32

50 years old

£29.09

£35.73

Premiums represent the best rates available across the UK market and are correct as of February 2021

If you are know how much cover you require you can calculate your own mortgage insurance costs with our quote tool which compares all the leading UK insurers →

Key Things To Consider With Mortgage Protection Quotes

When looking at MPPI, you’ll want to think about:

Exclusion Period for Unemployment Claims

If you take add Unemployment Insurance to your policy, you’ll need to know about the plan’s exclusion period.

This is an initial period where you can’t claim for unemployment / redundancy after you take out the policy. Exclusion periods usually range from 90 days to 120 days depending on the insurer.

Deferred Period for Sickness Claims

The deferred period is how long you must wait before the policy starts paying out if you fall ill. You choose this when you take out the policy.

Deferral periods range from 1 week all the way up to 12 months, with longer deferred periods meaning cheaper premiums.

Some insurers offer better rates for shorter periods, while others are better for longer periods.

Samantha Haffenden-Angear, Independent Protection Expert at Drewberry

As it only pays out for 12 or 24 months per claim, you don’t want your deferred period to be too long.

If you want long term cover to protect you to retirement you should consider permanent health insurance instead.

Samantha Haffenden-Angear
Independent Protection Expert

Type of Premiums

Many Mortgage Payment Protection policies have reviewable premiums. This means the insurer is entitled to review them each year as it sees fit. You may find your premiums increase at an unpredictable rate year-on-year depending on the insurer’s financial outlook.

Better policies offer age-banded or guaranteed premiums. Age-banded premiums do rise each year, but only by a set percentage detailed in your policy documents and solely due to your age. Guaranteed premiums, meanwhile, stay fixed for the life of the policy.

Definition of Incapacity

Many MPPI policies use the suited occupation definition of incapacity. This means if you suffer an accident or sickness, the insurer is entitled to assess your inability to not only do your own job but also any other role your skills or experience suit you to.

If you’re still well enough to do another role the insurer feels you’re suited to, it won’t pay a claim.

This is opposed to the own occupation definition, the best definition of incapacity, where the insurer pays out if you can’t do your specific job role.

Is Short-Term Cover Enough?

Mortgage Payment Protection only offers a short-term solution. It pays out for an absolute maximum of 24 months per claim and then stops. If you’re out of work long-term, this would likely be inadequate.

For those wanting to protect their income and mortgage repayments over a longer period, Long-Term Income Protection might be a better option.

Rather than linking it to your mortgage, insurers base Income Protection on your earnings. You receive a proportion of your gross (pre-tax) salary if accident or sickness stops you working.

While the policy isn’t specifically for your mortgage, you’re free to use the payout to maintain your monthly repayments and meet any other monthly expenses you have.

The best Income Protection pays out long-term, with a cease age set at your retirement. That means if you claim, the insurer pays a monthly income right up until you retire. You could therefore maintain your mortgage repayments over many years, rather than the maximum 24 months MPPI offers.

Compare Mortgage Insurance Quotes & Get Expert Advice

When covering something as important as your mortgage it’s essential to understand what you’re buying. Making a mistake could have expensive consequences.

The team at Drewberry is here to help you make an informed decision. We can help you decide whether you need Mortgage Life Insurance or Mortgage Payment Protection Insurance (or potentially both).

We’ll also calculate the cost of Mortgage Insurance by comparing quotes from every leading UK provider.

Why Speak to Us?

We started Drewberry™ because we were tired of being treated like a number.

We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.

For help and fee-free advice, don’t hesitate to give us a call on 02084327333 or email help@drewberry.co.uk.

I’ve held a policy with Drewberry for several years now. They are always friendly, insightful and offer great service.

Dan Pettitt
13/01/2021
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